SCOTUS Cites Property 3d in Indemnity Dispute

In an opinion delivered on May 15, 2017, by Justice Stephen G. Breyer, the U.S. Supreme Court cited Restatement of the Law Third, Property: Wills and Other Donative Transfers.

In Howell v. Howell, the Court unanimously reversed the opinion of the Supreme Court of Arizona, and remanded the case for further proceedings. The dispute before the Court involved a divorced couple. The initial divorce decree ordered the ex-husband to give half of his military retirement pay to his ex-wife. He later opted to receive $250 per month in disability benefits, which reduced the money that she received. The Court ruled that the ex-husband was not required to reimburse his ex-wife for the $125 per month that she lost due to the change in disability benefits.

From the opinion:

A state court may not order a veteran to indemnify a divorced spouse for the loss in the divorced spouse’s portion of the veteran’s retirement pay caused by the veteran’s waiver of retirement pay to receive service-related disability benefits.

The ruling hinged on the Uniformed Services Former Spouses’ Protection Act, a 1982 federal law governing the disposition of military retirement pay in divorces.

Citing the Restatement, Justice Breyer noted:

. . . John’s military retirement pay at the time it came to Sandra was subject to later reduction (should John exercise a waiver to receive disability benefits to which he is entitled). The state court did not extinguish (and most likely would not have had the legal power to extinguish) that future contingency. The existence of that contingency meant that the value of Sandra’s share of military retirement pay was possibly worth less—perhaps less than Sandra and others thought—at the time of the divorce. So too is an ownership interest in property (say, A’s property interest in Blackacre) worth less if it is subject to defeasance or termination upon the occurrence of a later event (say, B’s death). See generally Restatement (Third) of Property §24.3 (2010) (describing property interests that are defeasible); id., §25.3, and Comment a (describing contingent future interests subject to divestment).